Merger directive for cooperatives within this week

KATHMANDU, APR 15 -

After introducing the National Cooperative Policy 2013 that has given priority to merger between cooperatives, the Department of Cooperatives (DoC) is all set to introduce a merger directive.

The department plans to offer various facilities to cooperatives going for merger . The proposed directive has also provisioned forceful merger between cooperatives failing to meet the standards, which the cooperative policy has also envisioned. The directive will also encourage merger among cooperatives that are involved in same area.

DoC Registrar Kedar Neupane said they have already prepared the final draft of the merger directive. “By the end of this week, we will forward the draft to the Ministry of Cooperatives and Poverty Alleviation for final approval,” he said.

Amid a large number of cooperatives in the country still remain unregulated, the merger directive will enable the DoC to monitor cooperatives and is expected to control the involvement of a single individual in different cooperatives.

Although the Cooperative Act 1992 has provisioned ‘unification’ of cooperatives, there are very few instances of merger in the sector. So far, eight cooperatives in Morang, five each in Nawalparasi, Kavrepalanchok and Lamjung districts, and two each in Dolakha and Palpa have merged so far, according to the department. “The new directive will also simplify the merger process as the provision in the Act is complicated,” said Neupane.

Among the facilities the department plans to offer to cooperatives going for merger are tax exemption (through annual budget) and waiver of charges during the merger process. “The exact amount of the concessions and tax exemptions will be fixed after holding consultations with the Ministry of Finance,” said Neupane.

As far as the merger process is concerned, cooperatives have to first get approval from their annual general meetings (AGM) and apply to the DoC for approval of their merger plan. “While applying to the department, they have to state clearly the proposed name of the merged entity and when they plan to start their joint operation,” said DoC Under-secretary Bishnu Prasad Ghimire.

The proposed merger directive for cooperatives does not include the provision that requires obtaining the letter of intent and final approval like that in the central bank’s provision on merger of banks and financial institutions, according to Ghimire.

There are over 26,000 cooperatives operating across the country. Of them over 11,000 are saving and credit cooperatives. Amid such a huge number of cooperatives, the DoC has not been able to monitor them properly due to shortage of resources. As a result, many anomalies have surfaced in the sector posing risk to public deposits.

Source: The Kathmandu Post